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How much do you need, in order to retire?

I’m curious about this: what is REAL financial security? To me it is the ability to build income PURELY through returns on your investments, and have that return cover your expenses for the rest of your life.
Let’s see what it means for me, taking figures I know. Over the year, I spend about Rs. 7.2 lakhs, which accounts for my regular expenses, travel, holidays, thrills, necessities etc. and some buffer I’ve included once I have a bigger family. I know this is a little high, but I will assume that I don’t want to change my own lifestyle and see. I want to retire after 13 years, when I’m 45.
I’ve invested in high return securities like stocks, which have returned about 10% a year conservatively speaking. So let’s assume I cash some stocks every year, and pay the tax of 10% of short term capital gains (If I keep reinvesting the portfolio). That’s a net return on 9% on my investments.
Also I need to figure a cost of Rs. 10 lakh (today’s money) for my kids’ higher education costs.
So how much do I need to invest, if I expect to live till I’m 80? I’ve done my excel calculations and here’s what I found:

Age now: 32
Age at Retirement: 45
To survive until age: 80
Funds grow at (tax adjusted): 9%
Inflation expected: 6%
Corpus needed at age 45: Rs.3.3 crores.

Wow. That’s a big figure. To reach there, I have to invest Rs. 96,000 per month at a net return on 9% to make it!
Now to extrapolate this to right now: If I retired next year, how much money do I need?

Age now: 32
Age at Retirement: 33
To survive until age: 80
Funds grow at (tax adjusted): 9%
Inflation expected: 6%
Corpus needed next year: Rs. 1.98 crores.

This, really, is the amount of insurance I should have; since this is the money my family will need should something happen to me, or that I will need in case I’m in a bad accident that disallows me from working.
You can calculate this too – either as a simple calculation using excel or otherwise. You can even load in costs; such as kids education costs, marriage/college costs, any medical fees you expect etc. and find out how much money you need. Based on that, invest. Note that you need to beat inflation substantially – only investments that yield above 10% make sense; and the earlier you start investing, the better.
The excel sheet is with me – but it’s not very easy to use. I can send it to you if you want (mail me) or I can load it up on the net as a separate application.

Update 27 Aug 2009 : I have finally found the time to upload this spreadsheet. Download it here. Enable macros, fill in the blue fields, and hit the calculate button.
Note: No warranties, no guarantees, and definitely no liability to me. This is not financial advice, just an educational exercise. and feel free to pass it on as it is. Modifications are welcome with due credit to all participants. Please pass it back to me so I can update the article too.

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